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Demat Trading
Understanding the types of Demat accounts
Equity culture in India is growing, with the number of Demat accounts rising fourfold from pre-pandemic levels to over 16 crores (as of June 2024). If you are considering investing in equities, it’s important to understand the different types of Demat Accounts to manage your securities effectively and make the most of your investments.
What is a Demat Account?
A Demat Account, short for dematerialised account, allows investors to hold their shares and securities in electronic form. This system simplifies the process of buying, holding, and selling securities, reducing the risks associated with physical certificates.
Different types of Demat Accounts
Regular Demat Account
Ideal for: Resident Indian investors.
Regular Demat Accounts are the standard accounts used by Indian residents to hold equity shares, bonds, Mutual Funds, and other securities. These accounts are subject to standard maintenance charges, which vary depending on the service provider.
Key features:
- Wide range of holdings: Equities, bonds, mutual funds, and more.
- Maintenance charges: Applicable based on the value of holdings and the policies of the service provider.
- Ease of access: Easily accessible via online platforms and mobile applications.
Basic Services Demat Account (BSDA)
Ideal for: Small investors with limited holdings.
The BSDA was recently introduced by SEBI to encourage financial inclusion by reducing the cost of maintaining a Demat Account.
Recent changes:
- The individual must have or propose to have only one Demat Account where they are the sole or first holder. The individual can only have one BSDA across all depositories.
- The value of securities held in the Demat Account must not exceed ₹10 lakh for debt and other-than-debt securities combined at any point in time.
- No annual maintenance charges (AMC) for holdings up to ₹4 lakh; and only ₹100 will be charged for holdings between ₹4 lakhs and ₹10 lakhs.
Key features:
- Cost-effective: Reduced or no AMC based on holding value.
- Accessibility: Aimed at encouraging smaller investors to participate in the market.
Repatriable Demat Account
Ideal for: Non-Resident Indians (NRIs) looking to invest in Indian securities with the option to transfer funds abroad.
Repatriable Demat Accounts allow NRIs to invest in India, with the added benefit of repatriating the funds back to their country of residence. These accounts require an NRE (Non-Resident External) bank account for the transfer of funds.
Key features:
- Fund repatriation: Enables the transfer of funds abroad.
- Regulatory compliance: Adheres to FEMA (Foreign Exchange Management Act) regulations.
Non-repatriable Demat Account
Ideal for: NRIs who do not intend to repatriate funds but wish to invest in India
Non-repatriable Demat Accounts are similar to repatriable Accounts but do not allow for the repatriation of funds. These accounts are linked to NRO (Non-Resident Ordinary) bank accounts.
Key features:
- Local investments: Suitable for NRIs looking to retain their investments within India.
- Regulatory compliance: Managed under FEMA guidelines.
Also Read: Demat Account eligibility - Who qualifies?
Wrapping up
Understanding the different types of Demat Accounts is essential for optimising your investment strategy. Whether you are a small investor, an active trader, or an NRI, choosing the right Demat Account type can significantly impact your financial success. With recent SEBI updates, such as increased thresholds for BSDAs, investing has become more accessible and cost-effective.
Demat Account consolidates various investment avenues into a single platform, enhancing your ability to diversify your investment plans. Additionally, the demat facility streamlines the transformation of shares from physical to electronic format, simplifying their transfer, settlement, and overall portfolio management.
The Axis Direct account equips you with all the essentials for trading in stocks – from financial education and market information to top-notch research and robust tools, all conveniently accessible in one location.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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